Private Mortgage Lenders in Toronto
What is a Private Mortgage Lender?
A private mortgage lender provides mortgages to those who have, for any number of reasons, been turned down by Canada’s big banks and other lending institutions. As a result of Canada’s tighter lending rules, more and more Canadians are turning to private mortgage lenders.
Private mortgage lenders operate differently from traditional banks, trust companies, or other mortgage lenders. One big difference is the source of funding. A private mortgage lender gets its money from individual investors or group of investors. Larger private mortgage lenders, like Mortgage Company of Canada (MCC), have different funding sources, or include a pool of mortgages called a mortgage investment corporation (MIC).
Another difference between a private mortgage lender and the big banks is the application process. Where banks scrutinize every aspect of the borrower’s private life, including credit score, debt load, and income, a private mortgage lender does not.
With a private mortgage lender, what’s most important is the property being purchased. That’s because private loans are uninsured, which means the lender needs to fall back on the property should the borrower default on his or her loan. As a result, properties in smaller towns or rural areas might not qualify for as much money with a private lender.
Who Should Get a Private Mortgage Loan?
There are lots of reasons why individuals or couples get turned down for a loan from a traditional lending institution. It might be that they have a bruised credit score from a bankruptcy or divorce, have unsteady income, or are self-employed.
Canada’s restrictive mortgage-lending rules are also making it difficult for the average person in Toronto to buy a home. Where you could once buy a home with zero money down and a 35-year amortization period, today, you need a 10% down payment for homes between $500,000 and $1.0 million and amortization periods have been cut to 25 years. If you’re self-employed, you need third-party income validation
As a result, more and more Canadians are turning to private mortgage lenders. According to the Financial Post, private mortgage lenders account for around 4.0% to 5.0% of the overall national mortgage market. In Ontario, it is private lenders that are responsible for about 4.0% of new mortgages, which equals to a dollar value of approximately $1.1 billion.
The fact is that private mortgage lenders can help those in Toronto attain the goal of home ownership.
What are the Benefits of a Private Mortgage Loan?
The best part of using a private mortgage lender in Toronto is that you don’t need to meet the restrictive criteria set up by the banks. There is a large number of non-negotiable criteria you need to meet before you can secure a mortgage. Factors that can get in your way include if your credit score is unsatisfactory, if your income is too low, or if you’re self-employed, have outstanding debt, what your down payment is, and what is the price range of your home.
On top of that, the terms of the loan you want might not fit into the bank’s lending criteria, which include the rate and the timeframe. With a private mortgage lender, the terms of the loan can be whatever the borrower and lender agree to.
Another plus is the short approval process. This is really important in a tight housing market like the Greater Toronto Area. Through a private mortgage lender, you won’t go through a long drawn-out process.
As long as you do your research and understand the requirements, you can use private mortgage lenders to secure a property without the use of a conventional loan.
MCC must accept all applications for mortgages via licensed mortgage brokers. We are unable to accept direct applications. To find a licensed mortgage broker, contact the Canadian Association of Accredited Mortgage Professionals (CAAMP) or the Financial Services Commission of Ontario (FSCO).